What you need to know:

• Facebook attended neither of last month’s bargaining code meetings in Sydney and Melbourne with Treasury, ACCC and industry.
• As Facebook exits news, little chance of deals even for those ACMA says qualify, such as The Conversation and SBS.
• Algorithm changes and downgrading of news could see some publishers lose 40 per cent of referral traffic while cookie extension hurts those hoping for contextual revenue lift.
• Google offering deals to independent publishers, but many say they are lowball and for products they don’t use. They say only designation will work.
• Broader concern that Google will use renegotiations to significantly lower deal values for larger publishers in bid to set lower benchmarks globally.
• Fears that could leave firms that have used the Google cash to hire teams of journalists and launch new products having to cull staff.

Money talks

Facebook appears increasingly unlikely to agree further deals with publishers under Australia’s news media bargaining code. Now publishers fear Google also aims to significantly reduce the amounts it is willing to pay publishers in a bid to lower the benchmark for similar regimes being worked up in Europe and the US.

That could leave Australian media outlets that have used north of $200m extracted from the platforms to increase headcount and fund new products exposed.

Publishers told Mi3 Facebook attended neither of last month’s bargaining code meetings in Sydney and Melbourne. Google, which by value has negotiated the lion’s share of contracts with publishers, attended in Sydney.

Facebook has made clear its hatred of the bargaining code, now a template for publishers and regulators around the world. It is pulling away from news and re-engineering its feed. Publishers believe it is highly unlikely to renew any of the bargaining code deals struck 18 months ago. SBS and The Conversation, while qualifying with the Australian Communications and Media Authority (ACMA), are yet to agree any deal with Facebook.

Independent publishers holding out for bargaining code cash say there is no chance of the social media giant agreeing to further deals without being designated – a mechanism whereby platforms are formally declared by the Federal Treasurer to hold significant power over publishers and are forced to negotiate through mediation. They now face a triple whammy. Facebook’s algorithm changes will crimp referral traffic, which means lower audiences and inventory. As a result, publishers that have been reliant on Facebook for traffic “will likely see a 10-40 per cent hit over the next few months”, according to one independent media boss. Meanwhile, publishers hoping for revenue gains from higher yield contextual-based targeting as third party cookies are phased out have another year to wait following Google’s latest about-turn.

Headline numbers

Larger publishers will also suffer if Google becomes the sole bargaining code counterparty and succeeds in cutting the amounts it pays publishers. The Guardian, for example, has spent the millions it secured to hire 60 staff and launch new products. Managing Director Dan Stinton last month told Mi3 bargaining code cash has enabled  “huge investments in podcasting, our video team, in state-based coverage in Queensland, Victoria and New South Wales that we didn’t have before”. The masthead last month reported annual profits had slumped 80 per cent, citing investments in journalism as a primary factor. News, Seven and Nine have also used the cash to expand while enabling healthier margin.

“The large publishers secured a significant new revenue stream and they have based investment decisions on that,” said Nick Shelton, publisher of Broadsheet. “In three years time they will have to gut their businesses if that is no longer available to them. At that point they may be pushing for designation.”

Shelton said Broadsheet has not been offered a deal by Facebook. The deal tabled by Google was “so low that it would cost us more to fulfil than the revenue we would be getting”, he said, “but it allows [Google] to say ‘we have offered them a deal’”.

Other independent publishers said Google had applied the same tactic. 

“We’ve had no luck with Facebook and Google made us a token offer, but that was for Google Web Stories, a product we don’t use," said one. "The whole point of the code was for publishers to get paid for work they are already doing.” 

They suggested the amount being tabled was barely enough to cover a single journalist’s salary, “and then you are potentially hiring someone into an unsustainable role. So you are damned if you do and damned if you don’t. Without the platforms being designated, it won’t work.”

Mi3 put the complaints to Google. Per a spokesperson:

“We continue to engage with news publishers in Australia and have signed multi-year agreements with more than 80 publishers representing over 200 mastheads. More than half of these agreements involve smaller publications, including collective agreements with the Minderoo Foundation and Country Press Australia.”

Bigger play?

Publishers that attended last month’s meetings, held with Treasury, the ACCC, the Department for Communications and ACMA, said the government was “receptive” to their plight. But the decision to designate rests with Treasurer Jim Chalmers following the recommendations of the code review. The report is due to land next month, along with the midpoint review of the broader digital platform services inquiry.

Google is resisting at least one of the six recommendations within the digital services inquiry, which urged the industry to come up with solutions to solve opacity within the digital ad supply chain – specifically to enable verification of demand-side platforms – or face regulatory intervention. Another mooted solution is a common transaction identifier, intended to enable better visibility of how digital ads – and billions of ad dollars – move through the chain from brand to publisher, and therefore which parties are taking a cut and their behaviours. Publishers are keen for the transaction ID to be implemented, Google less so, pushing back on the basis that it is not privacy compliant and would allow users to be identified.

It could be that the outcome of the bargaining code review – and the quantum Google is willing to pay publishers in any further deals – is closely tied to the outcome of the digital platforms review and whether a transaction ID is mandated.